ZURICH (Reuters) - The former head of Swiss bank UBS UBSN.VX doubts whether traders at global banks acted with criminal intent to manipulate benchmark interest rates and accuses regulators of ignoring warning signs, he told Reuters in an interview.
Gruebel was at the helm of the bank last year when UBS said it had secured leniency from some justice authorities in exchange for its cooperation in probes into some aspects of setting Libor rates.
“I think that if interest-rate traders had acted with criminal intent, they would have hardly recorded it in emails. Traders are accused of many things, but they aren’t that short-sighted,” Gruebel said.
U.S. prosecutors and European regulators are close to arresting and charging individual traders with colluding in manipulating Libor rates, people familiar with the investigation have told Reuters.
Emails between traders released by Barclays Plc BARC.L. - the first bank to reach a Libor settlement by paying a $450 million penalty - sparked outrage after they showed employees thanking each other for setting rates artificially low.
Gruebel declined to comment on specifics of UBS, the first bank to say last March it had been subpoenaed in a probe into how banks attempted to manipulate the London interbank offered rate, or Libor, a benchmark that underpins an estimated $550 trillion in financial products.
UBS has said its cooperation relates to the setting of yen and euroyen Libor.
Gruebel, who spent nearly 50 years in the industry and ran both UBS and Credit Suisse CSGN.VX, was chief executive of UBS from 2009 until last September when he quit after a $2 billion trading scandal unrelated to the Libor affair.
Now an outspoken newspaper columnist, Gruebel said regulators should also be taken to task over their role in the Libor scandal.
“The regulators seem to have known of the allegations. When interbank lending broke down in 2008 - there effectively was no market - regulators didn’t ask themselves, ‘how are we going to handle Libor rate-setting?'” Gruebel said.
Having retired from Credit Suisse in 2007, Gruebel was brought in to run UBS in 2009 when Switzerland’s flagship bank almost collapsed in the financial crisis. He wasn’t working as a banker in 2008.
The unfolding scandal over Libor has raised questions about what regulators knew and what actions they took - documents reveal that the Bank of England made minor changes in 2008 after a warning from the U.S. Federal Reserve of Libor manipulation.
“Regulators were aware of the potential to manipulate Libor from the beginning,” Gruebel said.
Libor rates are calculated from estimates by large banks of how much they believe they have to pay to borrow from each other. They are compiled by Thomson Reuters (TRI.TO), parent company of Reuters, on behalf of the British Bankers’ Association.
Analysts estimate the scandal could cost the industry $20-40 billion, further damaging a sector that is struggling to work its way through the aftermath of the 2007-2009 financial crisis, economic downturns in Europe and the United States, and demands from increased regulation.
Reporting By Katharina Bart, editing by Emma Thomasson and Matthew Tostevin